Catalyst with Shayle Kann - 2026 trends: Gas turbines, Texas’ load queue and China electrifies

Episode Date: January 15, 2026

It’s a new year, which means the veteran energy analyst Nat Bullard has dropped another annual, data-rich presentation on the state of energy and decarbonization. And per what has become tradition, Nat is back on Catalyst – for the fourth time – to discuss some of Shayle’s favorite slides, cherry-picked from the 200-page deck.  In part one of their two-part conversation, they cover topics like: The significance of China’s rapid electrification Why the proportion of GDP spent on electricity has remained flat while oil has proven volatile The massive backlog and rising capital costs for gas turbines How current tech CapEx compares to past large-scale endeavors like the Manhattan Project and broadband build-out The extraordinary explosion of large load interconnection requests in Texas The divergence in load forecasting between grid operators and transmission providers Global drivers of electricity demand growth beyond data centers Resources Nat Bullard's 2026 presentation deck Catalyst: 2025 trends: aerosols, oil demand, and carbon removal Catalyst: 2024 trends: batteries, transferable tax credits, and the cost of capital Credits: Hosted by Shayle Kann. Produced and edited by Max Savage Levenson. Original music and engineering by Sean Marquand. Stephen Lacey is our executive editor. Catalyst is brought to you by Uplight. Uplight activates energy customers and their connected devices to generate, shift, and save energy—improving grid resilience and energy affordability while accelerating decarbonization. Learn how Uplight is helping utilities unlock flexible load at scale at uplight.com. Catalyst is brought to you by Antenna Group, the public relations and strategic marketing agency of choice for climate, energy, and infrastructure leaders. If you're a startup, investor, or global corporation that's looking to tell your climate story, demonstrate your impact, or accelerate your growth, Antenna Group's team of industry insiders is ready to help. Learn more at antennagroup.com.

Latitude Media covering the new frontiers of the energy transition. I'm Shail Khan, and this is Catalyst. So for all the talk that we have, at least in looking ahead the next couple of years, at like spiking prices for electricity and things like that, and the share of GDP that might come from electricity expenditures, it's really fascinating how range-bound it is. We basically spend between 3% and 4% of GDP on electricity and that is that, essentially.

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They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy. Tune in as we unpack how progress is actually made. Listen to critical capital on Spotify, Apple, or wherever you get your podcasts. Catalyst is supported by Fish Tank PR, an award-winning PR firm focused on climate and energy tech, renewables, and sustainability. FishTink is known for generating prominent and effective media coverage for the brands they work with.

If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. I'm Shale Khan. I lead the early-stage venture strategy of energy impact partners. Welcome. All right.

We're back. Long-time listeners will be familiar with my favorite time of the year at the beginning of the year when my friend now. Matt Bullard, who is a longtime analyst and researcher in the energy and climate space, but also now the co-founder of Halcyon, puts together his annual opus of hundreds of slides on the state of energy and decarbonization. It's a chock full of fun data that you don't get to see elsewhere. As always, I picked my favorites, and Nat and I talked through them. It's all sorts of interesting stuff. We talked to data centers, obviously, but not just data centers. Oil markets,

solar, batteries, all sorts of things. As usual, this was too long conversation to fit into one podcast. So this is part one. We're going to cover a whole bunch interesting things now and then come back next week when we will cover part two. But no further ado, here's Nat. Nat, welcome back. Shale, great to be back as always. Happy 2026. This is year four that we've been doing this? Something like that. It is indeed year four. We've been doing this recording as long as I've been doing a big presentation. So yeah, fourth year it is.

I do love a big deck. 200 slides this year. 200 slides exactly. So, wait, I have an important question for you. There's no way it just happened to be 200 slides. You made it an even number. What was the one that got cut out? Oh, the one that got cut out is nothing I can tell you.

I had about 365 slides as of the start of November. So the better way of thinking about it is that I essentially cut one slide for every slide that's in there. And in fact, I usually cut more than that. So I start off with like 300 plus and cut it down to about 150 or 160 and then build back up. So it's first an exercise in addition, then it's an exercise in subtraction to get to kind of the magic number. As you remember, way back when I had 141, which is like a sort of arbitrary prime number count or maybe even It's not even a prime number of slides. And then I always felt like there was stuff that I had left,

so I made it bigger, and then kept it there. I think it's quite possible that if you do more than that, you're going to lose the edit capability that gives it some of the strength over the course of 12 months. Yeah, I know. I think you need to start making the number, like some kind of a meaningful number.

Our mutual friend, Andrew Beebe, I always appreciated at his for obvious ventures. Their first couple of funds, the fun sizes were always very fun. the first one was $123,456,789. And then I think the second one was like $313,131,331, or something like that. It was palindromic. Anyway, you've got to come up with something better than 200.

I was thinking about that natural log pie. It's a rich tapestry of options of numbers multiplied by something that I should be able to get in there. But, you know, I do like 200 for the for now. It's easy for people to wrap their heads around and to benchmark a little bit when they're paging through it too. All right. Enough navel gazing about numbers of slides. Let's get into some slides. Okay. As usual, I've picked a subset of my favorite slides that I found interesting, and we're just going to run through them. So we're going to start on slide 15, which is something that given that this trend has been ongoing for quite some time, and in fact, the lines crossed like a decade ago, I'm surprised I didn't already know. know, which is that China is significantly more electrified, at least as measured by the share of final energy that comes from electricity, than the United States, like substantially more so. And I had somehow missed that trend.

This is a great one. It's some work from Ember that it's been now doing for quite some time. And what it tracks is, as you say, that the share of final energy that comes from electricity. But another way to think about it is like how electrified is an economy. And there are lots of different ways that you can get to a high number, right? One of them would be that you have very little primary industry. Another would be that you have plenty of primary industry, but you apply a great deal of electrification to processes

that otherwise would be driven with some kind of thermal input. Or you have like a tiny bit of primary industry and it's all aluminum smelting or something. Exactly. Like an example of a country like that, for instance, would be Norway, right? Which is both an advanced economy, has some industry, is highly primary energy from, or highly electricity rather than primary energy. But China is none of those things. It's a huge industrial economy. It's a huge user of primary energy. But it's also a consistent user of electricity for its final energy source. And it's also moving at a much, more rapid pace than either North America or Europe, which has sort of slowly ticked up over the course of five decades from 10% to a little bit north of 20%. China, meanwhile, has gone since 1970 from like 3% to 30%. Well, I want to benchmark to 1990, actually, because that's where I find the chart looks really interesting. In 1990, North America's already at like roughly 20% electricity, which is, by the way,

it's still the truth. It's true today, 22, 23%. And that's the number that I always use. Like, I knew that number. I always tell people if they overindex on, like, electricity or over-act, they're like solar is going to be the whatever. You know, it's worth remembering in the U.S. That electricity is 20% of final energy consumption, or I guess it's actually 22. But that's been true since 1990.

Whereas China in 1990 is down at, what, 7% electricity and then jump to 30% today. So, like, it's a very different trajectory. It's a totally different trajectory at a totally different scale, too. You know, everything in China is bigger when it comes to energy, and in particular when it comes to the sort of primary inputs. So I just think it's a really important measure as you talk about, you know, in the electrified future or electro tech or the electric tech stack or whatever it might be, that China is just is sort of grasping this as opportunity that's also being done.

scale. Like, it's one thing to say Norway can do this. It's another thing to say that China's doing this. Not that you necessarily can speak for the Chinese central government, but you're certainly closer to it than I am. I've heard that one of the reasons, one of the rationales of China focusing so much on electrification is that they wish to control their own destiny. They don't have massive domestic reserves of hydrocarbons, but they can produce their own electricity. That is why they're investing in solar or the battery supply chain and blah, blah, and nuclear for that matter. So do you think that that explains this? Like China is just saying we can't rely on energy imports long term, so we're going to electrify? So there's a bit of a nuance to that, which is that

the primary imports that you'd have of primary energy in China are going to be oil, for which is still a major importer, and natural gas for which it's still a major importer. It does import coal for kind of energy balance reasons, but it has an absolutely enormous indigenous coal supply that will last for centuries. So one thing to remember about this primary energy from electricity is that that doesn't mean that it's entirely coming from, say, hydropower or solar wind. Right. It can be coming from thermally generated sources.

But it is definitely within the realm of one's own destiny, right? Wherein the electricity is generated within boundaries, right? you know, within a nation state, it is effectively sovereign, right? And so in that sense, yes, it does provide a lot more control over destiny, less exposure to market forces, to geopolitics, to everything else, if you're firmly in control of that element of energy. And where in electricity is almost entirely within the national purview, then you would want to spend more and more energy, so to speak,

getting that electricity share of energy up as high as you can. Okay, so let's move on to slide 17, which I think is an interesting coda to slide 15. 15 is about how electrified an economy is. Slide 17 is super interesting, and I had never seen this data put together. It's about what share of GDP is spent on electricity versus spent on oil, specifically. And the shapes of those two curves are very different from each other in a way that I guess if you had asked me I might have predicted, but is stark when you look at it. So describe the difference between the two. Absolutely. So we're like five and a half decades into an era of thinking about energy shocks. And when we talk about those, we make it seem sort of

system-wide, but it's really about a shock in liquid hydrocarbon prices, you know, and specifically oil. And if you look back at the data, you can see just how indexed the global economy was to oil in terms of how many units it took of oil input to get a unit of GDP, and then the spend within different economies on not just energy writ large, but oil specifically. In 1980, so a year after the second oil shock coming from the Iranian Revolution, just under 9% of per capita GDP expenditures globally were going to oil. That's pretty amazing. Imagine $1.1 out of every 11 being spent on oil of per capita GDP expenditure. That's pretty extraordinary. At the same time, the share for electricity was a little over 3%. And if you carry this trend across the entirety

of the last 45 years, what you see is that the oil share, A, goes down significantly. By the late 1990s, it's less than 5%. But it also bounces around quite a bit. So, Right now, the share is in the range of still about 5%, but it's been as high as six and a half or seven. And in 2020, it was below 4%. Electricity, meanwhile, is essentially completely range bound. The highest it's ever gotten is close to 4%, and the lowest it's ever gotten is 3%. So for all the talk that we have, at least in looking ahead the next couple of years, at like, spiking prices for electricity and things like that.

and the share of GDP that might come from electricity expenditures. It's really fascinating how range-bound it is. We basically spend between 3 and 4% of GDP on electricity, and that is that, essentially. Yeah, that's the question, right? The reason this is interesting is because of the future, not necessarily because of the past. So just to reiterate the past,

electricity looks like a flat line for 50 years. Basically, rising prices. of electricity, or at least rising spend on electricity overall, let's say, matches GDP growth, essentially. It has to because it's a flat line. Whereas oil is super spiky. It's gone down since the 80s, sure, the early 80s, but it moves around a lot because oil prices move around a lot. Okay, so that's how it's gone historically. What happens now is a super interesting question, right? Because we're in this moment where, like, oil prices are pretty low. President Trump is trying to do everything he can do to get oil prices even lower. He's got this stated goal of

$50 a barrel if we start exporting a ton of Venezuelan oil, et cetera, et cetera. So he's trying to get oil prices low. Meanwhile, electricity prices are under upward pressure. I don't think anybody would debate that. And so do we see electricity escape its collar and spike? Could we see the lines cross? Which, by the way, tier, in this chart, they never have. We've never spent more of GDP on electricity than oil historically. It's just interesting to see whether this, like, dynamic of, like, one super volatile thing, which is oil and one super stable thing, which is electricity, whether that's going to hold. So let's do this as a thought experiment.

What would it take to make those lines cross? First of all, it would take much lower cost for oil, much lower oil price for one. Two, a much lower reliance upon oil as an input to GDP, or it's an input to economic growth. We get more units of, we get more units of economic activity out of, out of a barrel of oil effectively every year. But you'd need to rapidly increase or enhance that. Secondly, you'd need to both spend a lot more on electricity and get less from it. You would need to have it be less of a contribution to GDP growth. So, like, if you had both of those things happen, you'd be spending a lot more.

You'd be spending a lot more, but you'd be getting less GDP out of it. and therefore GDP is not going up as much, the expenditure is going up. That's how you would do it. So you'd have to have like $10 barrel and people using three times as much electricity or something roughly like that. Well, this is what's going to be interesting, right? So let's just take electricity on its own. Forget the comparison for a second. I think most people would bet that we're going to spend more on electricity overall over the next few years, five years, 10 years, whatever it is.

The question is, will GDP keep up? And they're tied to each other because, you know, the primary. The reason we're going to spend so much more on electricity is AI, and there's a bunch of people betting AI is going to help GDP go to the moon. Other people saying it's going to hurt GDP. That question sort of underlies whether we break this 50-year trend of basically spending the same portion of our GDP on electricity. Right.

And remember that it is also global. So there are global, not just the U.S., not just Western European questions within there. What happens when places that have a limited but non-zero reliance on oil rapidly electrify? And electricity becomes more of GDP, but you're in turn electrifying more of everything and more people have access to electricity. You know, we've somewhat plateaued on global access to electricity. There's like a million different ways that we can think about cutting this up to make it look possible. but it's the right kind of question to ask without a clear answer.

Let's put it by my not very satisfying response. Okay, good. Not a clear answer, so let's move on. Slide 28. I want to talk about gas turbines. This one, you know, we've talked about this a bunch of the spot and many of our listeners

are going to be well familiar with this. I hadn't actually seen the data laid out, though. So I think it's interesting measuring the order book for gas turbines that we have already seen relative to current production capacity. So basically, how under supplied are we on gas turbines. So what do you see there?

So I think it's actually important to start this at the front of the series, which is 2001. They were more than 80. In fact, closer to 90 gigawatts of gas plant orders in 2001, which is an awful lot, if you think about it. I mean, we have to remember the dash for gas that you and I started hearing about from industry veterans when we began is now quite some time ago, like two and a half decades ago. But there was a time when the world was ordering quite a lot of gas turbines, and manufacturing, obviously, was of the mood to meet that demand with new supply, only to find order books that collapsed from 80-something to well under 40 the next year. And then staying steadily below production capability for pretty much the entire time, with the exception of a few years, all the way up until right now.

The current production limit, and as you know, there's not that many companies that make gas turbines, is somewhere in the range of about 60 gigawatts a year. And we're likely last year to be passed that by about 20 gigawatts and to be passed that by about 30 gigawatts this year. And who knows, based on current orders, you know, 40 gigawatts above a 60 gigawatt production limit. And there's a lot of reasons for this. But the first and foremost is if you are in the process, in the, the, the, the, process and have the priority to manufacture gas turbines. What you really don't want to do is be oversupplied. It's not really a great, a great tenable market position. And being undersupplied

has, at least in the first instance, probably a net positive on your ability to book contracts and to secure durable orders from customers you want. And it has pricing benefits. People are going to howl it you to do as many as you can, build as much as you can. But if you're in charge, of building S reminds now, you probably have the institutional memory of the early 2000s. Yeah, and we've talked about this before with regard to electric transformers also. It's a similar situation where

like folks who've been in the industry a long time do remember a historic period wherein there was this huge order book boom and then the market fell out from under them and they ended up oversupplied and so there's been reticence to expand capacity too much for that reason. They are expanding capacity,

but maybe not fast enough. Anyway, what's interesting about it is that, but also, you know, even with that history, we are the most undersupplied we have ever been, or at least since the data starts at the beginning of the century, where right now, even today for 2028, the order book for 2028 today is over 100 gigawatts relative to about 60 gigawatts of production capacity,

which helps to explain why my new, you know the expression, everything is computer. I like everything is turban because now we're seeing, right, like if you're a jet engine company, you are pivoting to provide turbines for the grid, right? This boom supersonic and all the aer derivatives and, like, everybody who's got a turbine

is trying to turn it into an AI data center power supply. And not just that. There's companies that are turning things that are usable, if, frankly, somewhat imperfect solution for large-scale, always-on grid-connected power into power. Right. Error derivatives are traditionally used for very specific applications. And they're not being used necessarily to power things all the time, constantly for a decade straight. They can, but that's just not typically within the design spec.

The design spec would be for combined cycle turbines that are grid integrated and that are part of a big, liquid, well-supplied power market in which they play the role that they've historically played. Yeah. So it's interesting times for all of these things, right, in terms of what this, shortage for now what this order book mismatch brings to the market, who it brings to the market, the kind of approaches that people then take in terms of how they buy and sell power and everything. Yeah, it's different times. It's nothing like we've, it's nothing like we've experienced in our career. But for those who've got a little bit more tenure than us, it is achingly familiar. Virtual power plants are becoming a reliable way for utilities to manage capacity. But enrolling devices is just the start. What really matters is confidence, knowing those resources will perform when dispatched,

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isn't shaped by technology alone. It's shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks instead of engaging journalists or producing content? Are you wondering why your competitors

are getting press and you aren't? Fishtank PR is an award-winning climate and energy tech, renewables, and sustainability-focused PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, Fish Tank can help. Check out fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. Okay, so relatedly then, of course, we are under-supplied. So what do you expect? Prices are going to go up. So you've got some good data on that from you folks at Halcyon, which you and I actually talked about the last time you're on the pod a little bit, but I'm going to run through it again because

it is interesting. You've got good data on the average capital cost. of various types of natural gas turbine power plants as they are planned. I'd say these are ones that are not operating yet, but the expected capital cost, and how that trends into the future, which I find interesting. So kind of walk me through that,

and particularly the breakdown of the different types. One of the exercises that we do that manifests itself as a data series that people can buy from us in a subscription is just going through the regulatory corpore in the US and pulling all of the data series all of the data from the CPC and the certificate of public convenience and necessity or an equivalent that is basically the utility going to the state and saying, we need to build this X.

And in this case, we're looking at gas plants. And all of the data that gives you an idea of what these things are supposed to cost is within there. It's not broken out in a neat and tidy fashion where there's this like, here's this tabular spreadsheet with all the numbers in it. It tends to be hidden away in proceedings and responses and repubes. bottles and everything else. But the upshot of this is that we can map out, you know, on the order of like more than 160 active plants, like close to about 80 gigawatts worth of actual capacity in which the cost of a combined cycle has doubled.

Like 2026 deliveries, things that are going to come online this year, are in the range of, you know, let's say $1,200 per kilowatt. The projects that are looking to come online at 2030, 2031 are a little bit shy of 2,500. So close to doubling in that time period. And the reason I'm having this data useful is this isn't based on the announced capital cost for right now. It's based on the price as it moves into the future. So it's an updated and live number that reflects the actual market conditions underneath these things once they've been announced. Not just whatever deposit you put down with your turbine supplier, but the actual ongoing cost to make this thing into a real asset.

By the way, I also wonder, I don't know, you could probably tell me, because you've looked at this. this data, but does this include like EPC cost, for example? Yeah, this is the whole, this is the delivered, the delivered cost, something like the allowance for, you know, work during construction, all kinds, all the sorts of things that flow into it, minus the things that we know are, are discrete and separate. Like, if you needed to build 80 miles of feeder for it, we strip that out, because that's not like part of the actual stuff, the kit. So we should come back and look at this data set again in like 2030, because I do wonder whether they're actually underestimating the total costs, right? Because EPC and stuff like that in particular, that's also super inflationary,

and it's like really hard to find EPCs right now because they're all booked out. And so I wonder actually whether it's, I could end up being even more expensive than they think it is. Well, that's why we're, that's why we'd revisit this every month, because it moves. It's interesting to add new assets. It's almost maybe even more interesting to watch movement within existing assets based exactly on that. right, like the EPC target went up because it did, right? Like any number of reasons. Tariffs, cost of labor, right?

Well, it's the same, any number of reasons, but part of it is the same reason why gas turbines themselves. It's like an under supply problem. Yeah, exactly. So like you can see that coming through and continuing to go. And yes, we should be revisiting this essentially constantly. And we're already seeing, we see people getting like verbal quotes that are higher. I've had actual developers come up and say like, your numbers are low. And I was like, well, show me yours and I'll show you mine.

And then they don't. So we haven't actually gotten anything more concrete than this. But this is what's written. This is what is essentially disclosed buying law. And it's a pretty fertile ground to get an idea. Briefly, any other types of turbines. So simple cycle, not quite up so much, but up by about 50% from like $1,000, about $1,500 a kilo one. And then we start to see reciprocating internal combustion engines as well, or rice turbines.

And those are really expensive. Those are like $2,500 to $3,000 a kilowatt already. But interestingly, we don't see a long delivery pipeline for those. The delivery pipeline for those only runs out a couple of years. Like we don't see anybody planning rice turbines or rice installations in the 2030s yet. It's because I think they're mostly used for either bridge power or backup, right, replacement for diesel shens. In theory, in theory, but they're increasingly being deployed at a scale that suggests that they're being used for something closer to bulk power. Right. Yeah,

maybe that is, like I said, everything is turban. Everything is turbine. Okay. Well, let's stand the theme of like all this power build-out stuff. I really like this next one. Slide 32. So, so much CAP-X. That's my version of the slide title. You're comparing the total amount of CAPEX spending on, this is going to be predominantly data center, so it just says tech CAPEX in 2025 to other historic booms in CAPEX spending in the economy, which is a good way to compare. What do you find? So I'm going to give credit, first of all, to Michael Semblest and his team at Jake Morgan

and asset and wealth management. They built this slide first, not me. I did. In the past, I'd done some examples of Interstate Highway and Broaddense. band CAP-X as a comp, but I'd not done this full suite that they've got here, which goes from all the public works in the 1930s, like the Hoover Dam through the Manhattan Project, and we could call our wave of electrification in the U.S. in the late 40s, Apollo Project, the highways, broadband build-out, and the tech CAPEX.

And, you know, things like the Manhattan Project, electricity, the Apollo Project, These are like nests than or barely above one half a percent of US GDP at their peak. Even the Apollo project, even the Interstate Highway project is like six-tenths of a percent. Building out broadband CAPEX in the year 2000 at its peak was like 1.2% of US GDP. And tech CAPEX right now is just under 2%. So basically higher than anything else. And to your point, this is the capital expenditure to build, compute essentially. This is CAPEX for building just the actual computational elements, as well as

the buildings that contain them in the power step that's within the fence of the company's capital expenditures. It is not power and transmission and water CAPEX to go with it. So it's a pretty fascinating big number relative to everything else. And I will add all these other data points, as you've said, were you can go into history and you can figure out what year was the peak, right? And so the peak of broadband CAPEX was the year 2000 when it was just over 1% of GDP. That's a comparison against 2025 actual CAPEX of tech,

which may or may not probably isn't the peak. Right. And in fact, the 2000 example for broadband is instructive because the NASDAQ bubble burst in March of 2000, and CAPX kept going. So this is not a new observation. Michael Burry made this observation recently on Michael Lewis's podcast, that the capital expenditure actually lags what might be happening in the purely financial market. So yeah, like this could keep going for a while.

The cabex is committed. Sometimes it's already underway. And a lot of it will keep going. This is probably not the peak. Like most of the estimates based on what companies, themselves are saying for their estimated CAPEX have a higher number for next year. And then again, you attach the relevant quantum of investment in the electricity sector to it, and it's a lot more money too.

I mean, it's hard to say, in many cases, specifically, is this new CAPEX specific for energizing this data center? But certainly the prime mover of demand growth and of, building new infrastructure in the U.S. is for energizing data centers. And so, you know, the utility capex that goes with this is also, you know, in the tens, if not hundreds of billions of dollars. Okay, good segue. Let's get back into energy then. The energy results of this, right? So let's go to Texas. We're going to Erkot. Slide 91 is on the queue. The Texas interconnection queue. This is the large load interconnection queue, not the generation cube, although the generation queue looks, I think, kind of similar to be

honest. Everybody knows this, right? Like Texas, lots of people are trying to build data centers in Texas. No big surprise there. The queue has gone up a lot. No big surprise there. It is pretty astounding how quickly it has gone up, how recently. So the data suggests that the pipeline of large load interconnection requests in ERCOT in Texas was what 40-40-ish, 42 gigawatts as of January of 2024, so two years ago, it went from 40-ish,

42 gigawatts to 226 gigawatts as of November of 25, so I presume now is even a little bit higher. Those are stupid high numbers. Just as a reminder, I just want to, like,

frame this up a little bit. As of what, maybe two years ago, there were about 30 gigawatts of data centers in the U.S. in total. Yeah. So this is going from 41 to 226 in Texas alone in two years.

Yeah. In the queue. Now that's not all going to happen, obviously, but nonetheless. Yeah. So this is a great one. Urquat kindly publishes this every month in a somewhat unstructured format, but high enough frequency that it's worth like extracting and putting into this fashion that I got here. This is an awful lot, right? So 226 gigawatts, this current state peak load is in the range of about 85 gigawatts. So that's like two and a half Xing the existing state peak load, if all of this were to happen at once. It's gone, as you say, really, really rapidly.

It's increasingly co-located, like a couple of tens of gigawatts that are actually co-located in large interconnection load, which is interesting, and that keeps ticking up. But, you know, sort of sounding like financial disclosures here, not all of these assets will eventuate. I don't think that Texas is actually going to be building 226 gigawatts of just large load in the coming, let's say, seven to eight years.

It's the nature of interconnection cues, you know, a lot of it is speculative. And it's especially the nature of like bubbly interconnection cues. Like clearly most of this won't get built out. I think it is indicative, though, of one thing that is definitely happening, which is just like, People have the perception, Texas, you can build stuff, especially big stuff. A lot of data centers want to be big. And so there is a mad rush of developers, hyperscalers, reits, Rick Perry, basically everybody trying to lock up sites in Texas where they think they can go interconnect gigawatts.

And that adds up to hundreds of gigawatts in total. So there's something else here that I think you and I and many of your listeners will be very familiar with, which is a highly speculative supply side queue. We're very comfortable with the fact that, of course, wind and solar developers plan for 10, and they're going to build two, right? Or that ratio might even be too high. You've got 10 assets that you're planning

and you're going to build one of them. That you're highly speculative in terms of where you're going to go, what you're planning to do. The size of any asset itself is also fairly prospective. It depends on what you're going to be able to. get, right? And you'd be silly not to max out the possible interconnect on the site, and you'd be silly to not try to do as much as you can for optionality's sake. What I think we're not used to is a demand-side interconnection queue that has some of those same speculative elements. Like back in the day,

if you're building a hospital in suburban Atlanta, you're not going out and picking seven or 10 possible sites for that hospital. And you're definitely not picking seven to 10 sites scattered across four or five different states. Like if you are building a hospital, it's because you have a human need for medical services in a particular place. You're not viewing it as completely fungible between maybe we'll go to Tennessee and build this same hospital, or maybe we'll go to Texas, or maybe we'll go to stay in Georgia. I think it's a different thing, though, actually. I don't think what's happening is that developers are saying, I need a data center and I'm going to pick seven to ten sites in whichever one wins, wins, and I'll build it. It's actually, I think

what's happening that a lot of developers, speculators, et cetera, are saying, if I can develop this site, I can monetize it. I could sell this thing. Or maybe I can lease it if I'm a colo. So, you know, and I'll do as many of those as I can do that I think are good, because right now there's a really valuable market on the other side. And so everybody's doing that in Texas. Yeah, you're right. With the, my one other wrinkle being that, like, if you're the pure, if you're the pure expecting the element of this, and let's say this is in the good way, right?

You're the, you're in the land business side of this, right? You're in the site control part of this business. That's true. If you are then building the data center on one of those sites, though, if you're building the compute, you could be more fungible between that, between where you're exactly you're going to go, depending on other factors. To some extent, to some extent, there's more, like, spread across different places based on what you're planning to do. I need to build this compute, and I've got in this period of time, and I'll talk to whoever

has site control that will help me do that. All right. So then the direct result of this is the next slide, slide 92, which is the no-one-know-nows-any-thing slide. So we're staying in Texas. We just talked about this crazy, big load interconnection queue. So, of course, the question is then how much new electricity demand is there going to be in Texas as a result of that? That is the operative question, whether you are a grid operator or the market itself or whatever, and you have these great contrasting data sets of the load forecast from two parties who you would think would be pretty aligned because they're both trying to answer exactly the same question and they work hand and glove with each other and yet. So walk me through this data.

Sure. So this is one of the no one knows anything slides. I've got a couple. You know, my perennial favorite before this was markets respond to incentives. This is the new one for our current age as no one knows anything. So, yes, the transmission service providers who are responsible for building the grid and integrating the energy required to energize and electrify what happens in Texas are fundamental. serving the same market that Ercot, the grid operator, is operating. However, Urquat says,

you know what, we could go from like, little under 500 terawatt hours in 2024 to like 1,000 by 2030, right? So let's call it, you know, up 110% in that time period. The transmission service providers in the other hand are like, sorry, we expect to go all the way up to about 1,600 terawatt hours. We're going to go 240% up from where electricity demand was in the state in 2024. And part of the reason is that they're looking at different information. The TSPs are looking at everything that people are asking them to build, and Erkot is looking at everything that it thinks will actually happen. But also, the incentives are there.

Erkot's incentive is to keep things operational, to the highest degree possible, and at the lowest cost distributed across all of the people who receive service in Texas. The transmission service providers are paid for building assets and will happily, if possible, build whatever asset base they're being asked to build. So the true number is either somewhere in between or much closer to Erkott's figure. I mean, Urquot has the reason for demand and supply balancing and upkeep and everything else to get it really, really accurate in energy terms. But the transmission service providers

have every incentive to go as big as possible because that's how they get paid. They get paid to build assets. So your view here is that it's less like they just have different views of the future and their views vary so substantially from each other and more just like the transmission service providers have an incentive to maximize the number

and it's not a real forecast? Well, it's no, but it is driven. It is a forecast. It's driven by, what people are asking them to do. The question is how much discounting are they doing? And that, I think, is where there's a significant difference between Erkot and the TSP's.

This is the forecast out to 2030. It's four years away. It's not far. In electricity supply terms, it's like the blink of an eye. It's like no time at all. And there's a difference between these two forecasts of about 500 terawatt hours. contextually, the U.S. total electricity demand is in the range of 4,000 terawatt hours annually, right? Coming up, like, closer to 4,500, but, but, yeah.

So call that, so call that more than 10% of all U.S. electricity demand as just the delta between these two forecasts in Texas alone. Yeah, yeah, or put it, or put it this way. Do we think that in 2030, Texas is going to consume as much of, electricity as a third of the United States consumes right now. Like, it's a, potentially. As compared to roughly 10% or like 11 or 12% last year. That's right. So like it's, you know, like sometimes these things are more helpful when we ask them in this fashion, in this comparative fashion, what would need to be true for all of that to happen? Right. And, you know, it's,

it's a huge number, but again, it doesn't exist in a vacuum. And this is back to my sort of earlier point about, about how developers work is there are other grids that are similarly aggressive in their expectation of what demand might look like based on requests that they're getting without any ability to kind of zero that out against similar or identical potential demand that might be built somewhere else and not happen in wherever it is. So if you're at, you know, like, there's kind of no way to cross-reference all of this stuff yet because of the nature of the way they're regulated state by state. Okay, so the next one I want to jump back, actually, to slide 35, because this one, I think it's a

reflection of like, I guess it's a reflection of a U.S.-centric mindset that I have that I'm very surprised by this, that or I don't believe this data. But the data is from the IEA, and it's a projection of how much. much of the electricity demand growth through 2030 is going to come from various different sectors. And we just talked about, in the case of Texas, but it's also true, the case of the U.S., like this, like, insane boom and electricity demand coming from data center. So what's surprising about this other data set is that data centers are ranked fifth in terms of the source of new electricity demand. I presume that's because this is a global perspective,

not a U.S. perspective, right? That's right. So this is a global perspective, globally, electrification of industry is going to be like 30% of the demand growth for electricity between 2024 and 2030. Even electrified transport, which we in the U.S. are sort of being trained away from thinking about as a big driver of demand is a bigger driver of demand than data centers is or would be. But even like even appliances, there's a lot of the world that needs to add, you know, its first dishwasher, right? Even its first refrigeration. Space cooling, so just aircon and buildings, is going to be like 10% of the total growth. And data centers are right around 8%. What I would say is, consider this very much a moving target.

Like, I will be very interested to see what this print looks like a year from now, two years from now, three years from now, right? And the other thing will be to be considered is, is there, trade-off, if there's a sort of finite quantum of new electrons that are going to be consumed between now and 2030, is it going to come to the point where, well, yeah, more of it went, more is being consumed by data centers and less in absolute terms by space cooling, that would be complex. That would be something for the rest of the world that would be akin to a trade-off that we really haven't had to do in the U.S. in quite some time, at least not at a national level.

Yeah. Yeah, it's a moving target. Data centers are going to, I mean, even on a global basis, I think they're going to move up this ranking before too long. I would agree with that, certainly. They're going to move up, but where they land is a really big question and how they interact with the rest of these different places that electricity will be consumed.

It's going to be really interesting to watch. Yeah, and the fact that in some markets, it's to some extent, like, it's a near-zero-sum game in the sense that there's only so much supply. And we're building out as much supply as we possibly can. So, like, every new data center is a new electrified industry facility that isn't going to happen, probably. Nat Bullard is a longtime climate tech analyst and writer. He's a co-founder of Halcyon, which is an AI-assisted Research and Information Platform. This show is a production of Latitude Media. You can head over to Latitude Media.com for links to today's topics.

Latitude is supported by Prelude Ventures. This episode was produced by Max Savage-Levinson. Mixing and theme song by Sean Marquand. Stephen Lacey is our executive editor. I'm Shayal Khan, and this is Catalyst.